Methodology

Methodology

Portion of Well Log

A significant amount of due diligence from engineers and geologists is involved in generating prospects in the oil and gas industry. Swan Energy has a rigorous process to identify prospective projects. The first step in our due diligence is to determine a target area. Oil and gas production of certain formations are usually localized to different parts of a state. Geologists examine where previous production in certain formations exists and then concentrate our efforts on evaluating this area.

Before examining a particular field we are interested in, we must understand the geology of the area through a regional study. Understanding the regional geology allows us to find potential reserves previously undiscovered and more efficiently evaluate existing producing reservoirs. Once an area is deemed acceptable for further investigation, well information and data are collected for a particular area. The information we collect includes: producing formation, production data, initial production, tests performed on the formation, etc.

The most important piece of information we utilize are electric logs. Electric logs record the various properties from various formations after a well is drilled. We use the information from previous wells to assist us in interpreting the geology of an area which can lead to a greater understanding of the reservoir as a whole. There are only a few productive formations we generally target in an area. Geologists analyze the electric logs and determine the tops and thicknesses of various formations to map the geology of an area. These maps are the first step in allowing us to determine the most perspective area to drill a well.

After the reservoir is mapped, the properties of the reservoir must be determined. These include: oil, gas, and water saturation, type of reservoir, reservoir thickness and various other properties. These properties are used to determine the amount of oil in the reservoir and the volume of oil remaining. Once we know these properties we can obtain the previous production records in the area. We combine this information with our original oil in place calculations to determine the amount of remaining oil and gas. This allows us to calculate how much oil is remaining in a particular reservoir. This is the final step in evaluating a prospect.

If all of the factors indicate there is a sufficient amount of oil to recover, geologists will combine all of this information to determine the best area to drill a well. This evaluation is then submitted to management for approval. If a prospect is deemed acceptable, geologists will deliver the prospects to engineers to determine the best course of action to take in order to retrieve the oil and gas.

This is not an offer, nor solicitation to buy; such may be done pursuant to a Swan Energy, Inc. Confidential Information Memorandum

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Swan Energy manages companies and partnerships in oil and gas, trucking and disposal, and mining.